APPENDIX F

STAFF ANALYSIS OF PM EMISSION REDUCTIONS AND COST-EFFECTIVENESS
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ARB’s methodology for determining cost-effectiveness of a regulation is to determine

what costs are involved to comply with the proposed regulation over the life of the

controls and to compare those costs to the emission reduction benefits to the public.

Staff summarizes this cost-effectiveness as cost (in $) per pound or ton of air pollutant

reduced, in this case diesel PM. The benefit to the public in terms of health expenses

avoided and lost productivity are not included in the cost-effectiveness calculation,

although the value of those benefits is substantial.

The proposed implementation schedule dictates a phase-in by calendar year, with the

full 85 percent reduction in diesel PM by 2007 for transit agencies on the diesel path

and by 2009 for transit agencies on the alternative-fuel path. Staff assumed that retrofit

diesel particulate filters (DPF) would only be available for 1994 through 2002 model

year engines, and that transit agencies would retire or repower older pre-1994 engines

to achieve the PM reduction targets. Some transit agencies keep buses beyond the

twelve year Federal minimum useful life, and therefore could comply with this regulation

by retiring old buses that are past their useful life. Another strategy a transit agency

could employ to reduce diesel PM emissions would be to fuel its fleet with a dieselwater emulsion, such as PuriNOxTM.

Staff is only considering the cost of retrofitting buses (1994 to 2002 MY) in calculating

the cost of this regulation. The Federal Transit Administration (FTA) pays 80 to 83

percent of the purchase cost of a new bus. The remaining cost is made up from local

and state transportation funds. Local and regional transportation planning agencies

control the allocation of federal, state, and local transportation funding in urban areas;

the State Department of Transportation allocates some funds in rural areas. The ARB

staff and some local air districts have encouraged transportation planning agencies to

provide more funding for transit agencies that need to comply with this Fleet Rule and

funding has been made available, in most cases, during the first two years of

implementation of this rule. Staff expects funding to continue to be available to cover

the costs of new buses.

The cost of repowering, i.e., replacing an existing engine with a new engine, may also

be covered by Federal, State, and local funds. Federal funding is available for 50 to

100 percent of the cost of repower, based on an informal survey by staff. In addition,

transit agencies that repower from older engines to new engines realize significant

savings in fuel, from improved fuel economy, and in maintenance costs. Therefore,

staff believes that the cost share of the repower is off-set over the life of the new engine

by reduced fuel costs and maintenance. For example, in the case where Federal funds

pay for 80 percent of the cost of a repower, over the six year lifetime of the new engine

a transit agency could recoup all of its costs through avoided engine rebuild, and fuel

economy and maintenance savings (Table 1).
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Table 1. Example of Costs Recovered by Engine Repower,

2-Stroke to 4-Stroke

Average Cost to Repower with New Engine and

Rebuilt Transmission $80,000

Credit Federal Cost Share 80% (50-100% Range) -$64,000

Credit Avoided Cost of Rebuild -$6,000

Credit Annual Fuel Savings for 6 yr Engine Life -$12,000

(Maintenance Savings Not Quantified)

Net Cost of Repower -$2,000

In general, two types of costs were accounted for in the cost-effectiveness analysis,

capital and operation and maintenance (O&M) costs. It is important to note that since

most of these costs are predictive, they could vary significantly depending on the state

of the economy, demand, competition, and unknown factors. The costs of technology

typically decline over time. These costs have been obtained from the U.S. EPA, the

Manufacturers of Emission Controls Association (MECA), and from actual quoted costs

to transit agencies.

Capital costs for a passive DPF include the cost of the device, an engine backpressure

monitor, and its installation. In general, the horsepower of the engine determines a

DPF's cost. Transit bus engines covered by this rule are heavy heavy-duty engines, so

the DPF cost is on the high side. The current cost to retrofit heavy heavy-duty on-road

engines and vehicles with catalyst-based DPFs is estimated to range from $4,750 to

$9,500. This assumes a cost of $10 to $20 per horsepower, as reported by MECA in

“Emission Control Retrofit of Diesel-Fueled Vehicles” (March 2000). The current

average cost to purchase a DPF for an urban bus engine is approximately $5,500.

In contrast to the current retrofit costs, the U.S. EPA’s estimate of the future (2007)

costs of applying DPFs to new on-road heavy heavy-duty engines shows a significantly

lower cost, about $1,100. The U.S. EPA estimate is based on higher production

volumes, and is similar to the future cost projections presented by manufacturers

(MECA, March 2000). Therefore the estimated DPF capital cost ranges from $1,100 to

$9,500 over the implementation of this rule (2003 to 2009). Based on current bids for

retrofitting, however, staff believes a 2003 DPF cost of approximately $5,500 is a

reasonable current estimate for an urban bus engine. For this rulemaking, staff has

used a median cost of $3,000 as an average of current and future costs for urban bus

engines (Table 2).
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Table 2. Capital Costs Associated with a Passive DPF Retrofit of Urban Bus

Engines

Cost Categories Median Cost Range

Capital Cost, inc. Installation $3,000 $1,100 - $5,500

Annual Maintenance $80 $0-$190

O&M costs considered by staff included the cost for maintenance, for example, periodic

cleaning of the trap. Based on conversations with the manufacturers and demonstration

program experience, staff determined the number of cleanings would be on average

once a year or less, dependent on the device and other vehicle variables, such as oil

consumption. The incremental cost of low sulfur diesel fuel is not included in this

calculation, as low sulfur diesel was required to be implemented as of July 1, 2002, and

its cost was figured in the original rulemaking. The cost of DPF inspection and

cleanings is estimated to range from zero cost to $190 per year, with an average cost of

$80. Total O&M costs per urban bus for maintenance are, therefore, an average of $80

per year.

Another option available to control diesel PM emissions, which may be verified in the

future to Level 2 (50% reduction), is an emulsified fuel, Lubrizol’s PuriNOxTM.

PuriNOxTM costs approximately 25 cents per gallon over conventional diesel fuel, based

solely on incremental operation and maintenance costs. This option is not considered

in the cost-effectiveness calculation because the technology is not yet verified for use

as a diesel emission control strategy.

Staff determined the amount of PM, in tons, reduced per year based on the

implementation of this proposed regulation (Table 3). Utilizing the EMFAC modeling

program, implementation of these proposed rule changes is expected to result in a

reduction of 24.1 tons of PM in 2004. For 2006, the total PM reduced is estimated to be

36.3 tons. By 2008, the proposed regulation would realize an estimated 38.5 tons of

PM reduction.

In order to arrive at the discounted capital costs for the regulation, staff multiplied the

capital costs by the capital recovery factor1, and assumed a lifetime of the DPF based

on the minimum warranty period of five years with an annual interest rate of seven

percent2. It is quite likely a DPF will last much longer than five years in a wellmaintained vehicle, as some DPFs have been operating for over five years in Europe.

 

1

 Capital Recovery Rate Factor: 480r(1+r)^N/[(1+r)^N-1], where r = the annual interest

rate, and N = lifetime of project (in years) (Linsley, 1977).

2

 USEPA uses the factor to calculate costs of environmental programs.
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Five years was used in an effort to make a conservative estimate. Clearly, the cost

effectiveness would be lower if the DPF has a longer lifetime.

The average costs of implementing the program from 2003 to 2009 were included in the

cost effectiveness calculation (Table 3). Based on the median cost scenario, the cost

effectiveness would be approximately $50,460 per ton ($25.23/lb) diesel PM reduced.

Staff also calculated a low cost scenario, based on the future cost of $1,100 per DPF, of

$21,824 per ton diesel PM reduced and a high cost scenario, based on the current cost

of $5,500 per DPF, of $89,021 per ton reduced. The staff predicts the cost will fall

toward the low to average end of the cost effectiveness scale, based on past

experience and because engine manufacturers already are required to install DPFs on

new urban bus engines produced after October 1, 2002 to comply with the PM emission

standard of 0.01 g/bhp-hr. The federal PM emission standard declines to 0.01 g/bhp-hr

for all heavy-duty diesel engines beginning with the 2007 MY.

Table 3. Average Cost Effectiveness of Proposed Regulation

Year Diesel PM Reduced

(tons/year)

Total Annual Cost

($)

Total Cost ($) per

Ton PM Reduced

2003 24.1 658,800 27,347

2004 29.2 1,133,400 38,815

2005 36.3 1,580,000 43,502

2006 37.1 2,026,600 54,699

2007 38.5 2,445,200 63,495

2008 36.0 2,356,460 65,548

2009 33.4 1,997,860 59,816

TOTAL: 234.6 12,198,320 50,460

The costs accounted for above do not include administrative costs. Reporting and

additional administrative costs are not expected to result in any significant cost to transit

agencies. Under the existing rule, transit agencies must already make annual reports,

and the reporting required by this proposed amendment substitutes for reporting that

has been deleted from the original rule.

The cost of maintenance training is not included in the analysis. From discussions with

trap manufacturers, ARB staff concluded that the DPF manufacturer would provide

maintenance training at no additional charge.

Staff assumed no fuel economy penalty would exist from the use of a DPF. This is

based on staff experience with the verification procedure and the inability of studies to

determine a consistently significant impact, either positive or negative. It is possible a

slight penalty or benefit might exist, but until more conclusive data are available, staff

assumed either would be negligible.
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Waste ash generated by cleaning a DPF may be a hazardous waste in California

because of high zinc content. The source of the zinc is the lubricating oil. Staff

assumed the fee for disposal of ash from a DPF would be negligible, based on the

following analysis. From experience gained during demonstration and testing

programs, ARB staff estimated the weight of ash generated per DPF to be

approximately 10 to 20 grams, which is dependent upon oil consumption. The quantity

of ash would be greater with more than average oil consumption. Based on

conversations with the manufacturers and demonstration program experience, staff

determined the number of cleanings would be on the average once a year or less,

dependent on the device and other vehicle variables, such as oil consumption. Using

these values staff determined the quantity of ash that might be generated by a fleet of

ten, 100, or 1000 transit buses (Table 4).

Table 4. Ash Disposal Analysis

Number of Ash Accumulation (kilograms per year)

Buses Low High

Years to Accumulate

100 kg of Ash

10 0.1 0.2 500-1000

100 1 2 50-100

1000 10 20 5-10

Considering only waste ash generation, a transit agency could qualify as a small

quantity generator. According to the Department for Toxic Substances Control, a

hazardous waste may be stored on-site for 180 days or less, after the site has

accumulated 100 kilograms of waste. Staff did not include the cost of ash disposal in

the cost effectiveness analysis because of the long length of time to accumulate

sufficient ash for disposal, the uncertainty that ash will be a hazardous waste in all

fleets, and the variability in ash quantity generated per vehicle and fleet.